It is Obvious

Chris Rick has got altogether too much to say

My home is someone else’s castle

Posted by chrisrick13 on February 27, 2018

It is obvious: there is no housing crisis

I stumbled across a homeless charity’s website. Figures are difficult to get but it estimated about 5,000 people are ‘living rough’ in the UK. That means sleeping out in the open at night. It is -8º C as I write this so they have my sympathy today.  I had guessed that it would be 100,000 so I was out by a long way.

Tonight then, everyone bar 5,000 of us is sleeping under a roof.

There might well be a housing crisis but it is certainly not a shortage that is the problem. A lot of those people are not sleeping where they want to. In fact I am not either. I can think of many places I would rather be sleeping tonight than here! I can think of a lot of people who would rather be sleeping here than where they are!

So the housing crisis is one of not enough of the right types of roof not a shortage.

Building lots more houses won’t fix the problem, if indeed it is one. If as a nation we were to build a lot of roofs of the right type that people want to sleep under and can afford to, then by definition they are moving out from under one roof to another roof somewhere else. The obvious conclusion is that house prices will start to go down in the types of house where the ‘pressure’ is eased by the new roofs. Alas, the value of those new roofs will also go down.

The economy and, perhaps more importantly, the banks are being kept viable by an inflated house market. The last thing the government wants is a reduction in the value of housing (roofs). Yet it has to promise lots of new houses. Still as long as it is not enough, and it never is, then all will be well.

Perhaps building a few shelters for the 5,000 on the streets would be a cheap, effective and humane thing to do. Just go out at night, scoop people up and offer them a bed. You could use some of the unemployed to do it. Obviously need detail to handle abuse of the system but doable for a very small cost compared to the benefit.

I was then moved to look at people who have their own roofs. Or rather those that shared ownership of a roof with their bank. To give it some perspective I was looking today at a letter from the Halifax telling me that the interest rate on my mortgage, in the late 70s, was 9.75%.

It is difficult to get consensus numbers but I was looking at numbers of households with negative equity. Then I looked at numbers in arrears on their mortgages. Then I looked at numbers of JAMs (just about managing). These sets certainly overlap. My estimate is that it is over 1 million households.

At some point in the UK inflation will take off or there will be a run on the pound. We can just rename the country ‘Zimbabwe’ (its president is between jobs at the moment) and leave interest rates where they are or we can put interests rates up and a million people on the streets.

It’s coming to a street near you!  After the Italian election we might get trial run to see what happens before it happens to us.

It is obvious: there is no housing crisis there is a roof type crisis.


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Oh dear

Posted by chrisrick13 on December 8, 2017

It is obvious: this is easy

I will continue to moan that if you play poker with your cards face up on the table do not expect a good result.

The UK Brexit negotiators (sic) have to tell everyone what they are doing and place their cards face up.  That includes telling the EU negotiators.  It seems that every interest group in the UK is trying to get the UK negotiators to follow their particular niche requirements.  In short it is a mess.

However there is a very simple way out of this.

In my reading on negotiating I discovered the story where Golda Meir and Yasser Arafat were walking in the gardens together between negotiating sessions on…something.  Meir said to Arafat of his latest outrageous demand: if I agree to your demands and take them to parliament I will not last another 5 minutes as PM or leader of my party and they will reject your demands.  Give me something I can fight for that they will at least consider.  Arafat saw the logic and put forward something that she did take to the parliament and parliament accepted it.  I wished I could say that the rest was history but the Israel/Palestine conflict will be many more years before it is a part of history.

This is the model for the UK.  The UK government says to the rest of the UK that they are going to negotiate in secret.  It will release as much information as possible that does not prejudice the UK negotiating position as it goes along.  Parliament will see the deal at the end and vote on it after a long debate.

Mr Davies says to Mr Barnier: we’ll agree to just about anything you want.  Remember though that there are 630 MPS going to vote on this.  You be the judge on what you demand actually making it into an agreement that the UK will sign up to.

In this way the EU is suddenly negotiating with themselves.  They have to think about what UK public opinion and thereby the MPs will think of anything they propose.

We could probably walk away and leave it up to the EU to sort it all out.

You might not think that it is much of a negotiating tactic (it is).  If you are in doubt then note that today Mr Barnier said that he was happy with the recent concession by the UK (for that is what it was) but he had to put it to the council of ministers!!!!  They are already doing it to us!

(Technically, this is a variant on the higher-authority gambit.)

I’m standing a long way from where it is happening but from here it looks like we are screwing this negotiation up badly.  My biggest hope is that there is no agreement and we let all the systems sort themselves out and arrive at their own equilibrium after the so-called hard Brexit.

Indeed in true 1984 fashion I think that the hard Brexit is actually the easy one…and the best one.

In medieval times there was a lot of torture…actually, I suspect that the levels are the same in the present day.  We have all seen dungeons and torture chambers if only in film.  They were seldom used.  Before the real torture the prisoner was ‘shown the instruments’.  Usually enough to get all the information they wanted.  The imagination was stronger than the reality.  I see many people showing themselves (and us) the instruments.  They have no idea.  Leading the way on those already proven to have no idea is the BoE with its prediction of an immediate rise in interest rates post the vote.  The treasury is up there with its prediction of an immediate reduction in GDP.  Stop showing yourselves the instruments!

We existed as a sovereign nation for many years before the EU and will after we leave.  As it is approaching the new year and a time for predictions I will add that the UK (or all the bits of it) will be in existence long after the EU has gone.  Hurry up and get the negotiations done so that there is still an EU in existence for us to leave.

It is obvious: this is easy – isn’t it?

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There is no housing shortage

Posted by chrisrick13 on November 24, 2017

It is obvious: I have lived in a hole in the ground

If I am right then we need lots of new houses for the doubling of population needed to keep GDP on its 2% exponential growth so we can pay debt out of future earnings via the bond market.

I am wrong, because the OBR have said it will be 1.5%, it is not enough to keep this economy running. The only bright spot is that the OBR is never right. Perhaps they will be wrong in the right direction this time!

(Debt at 90% of GDP is the point at which an economy enters a spiral of increasing debt and reduced ability to pay it off. The OBR has ours peaking at 89%. Lets hope this is one they do get right…they won’t.)

I wonder that there is a housing shortage. There are a few people living on the streets but not many. So everyone is somewhere under a roof. By definition there is enough housing. The problem is that it is often not the roof that the person wants to live under. Could be for many of many reasons.  I read today that there are many empty houses.

At that point I could enter the debate on why houses cost so much to buy. I’m assuming that rents also match house ownership costs because part of the cost side of rent is the interest on the money that instead of being invested in a house could be invested elsewhere…at 0.5%

The elephant in the room is that if house prices were suddenly to drop by (say) 50% then many people would find themselves in houses with loans on the houses worth much more than the house itself. Many would walk away from the debt and the banks would go bust. We might also have riots in the streets. There would be so many doing this that many might walk away and then squat in a newly empty house with plenty to choose from. Perhaps swap with their neighbours. Everyone would still have a roof but many would not be paying anything for it! This would turn around finances for many families…and the rest of us!

What interests me is building houses for the population needed to keep us afloat economically or simply to meet the shortage. Where will these houses be built? People can move around and do it very well in a mainly rented house market. It is not easy to move houses. Suppose that you build 100,000 houses in Birmingham but nobody wants to live in them. Post the war there was a thriving car manufacturing industry. It is not there now. Same for shipbuilding in Newcastle. It carries through to computer industry with ICL and not so far back to DEC. Big manufacturers to the west of London that no longer exist. The jobs and the people no longer needed in those locations.  You cannot just build houses.  A lot of other things needing building at the same time: hospitals, schools, prisons (lots of those).

So I am happy that someone will build 300,000 houses next year, but tell me where and why before you build one. (And we need 600,000 of them each year at least.)

It is obvious: I have lived in a hole in the ground – and it’s not nice.

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My house needs to be my castle

Posted by chrisrick13 on November 7, 2017

It is obvious: we’re doomed

House prices are a bubble.
They are too high from any perspective.
They are held where they are by us, the UK population who want and need house prices high. They are our wealth. At least that is the delusion that most of us are under.
The government wants them high. If they fall then the banks will go bust. A lot of people will go into negative equity and walk away leaving the banks in a mess…and the banks are too big to fail.
For the same bunch of reasons interest rates will be kept low. If not a lot of JAMS will walk away from mortgages.
The government would like high inflation to inflate away debt. But high inflation kills the JAMS as wages will not keep pace.
High inflation demands high interest rates. Kills the JAMS – they have no spare cash.  Kills us all as the government rolls over into high-priced debt.
If there is inflation then bond yields go up and the government rolls over into a lot of high-priced debt. It will default at some point. Then we look like Argentina or Iceland or even Greece.
If everyone sells the pound then it is only defended with higher interest rates.  Kills the JAMS.

Therefore the government will keep things just as they are for as long as they can. Maybe they see that they can manage up to a Labour victory in the next election (can’t believe I just said that).

(Step aside for a moment. Can you think what that nice Mr Corbyn as PM would do to the country? On Monday he talked about a national bank of reconstruction (or some such). It will spend on infrastructure and the like. It will invest in this country he said. It will borrow £1tn and spend it in short order. Who will service the loan and when will it be repaid? He might be good for us as he will bring on the reset and we need that as fast as possible. In the meantime he will put money into the NHS of which I will be big customer and he will protect pensions of which I will be relying on two.)

I think that house prices up will be kept up using any trick available. They will stay up for far longer than you think possible.

That means at least a couple more years that a house owner can hang on for and then find a bigger fool to sell to.

So there is a window to move to the Outer Hebrides (that will soon become a sub-tropical paradise) and realise a lot of cash. Keep some of it under your mattress as paper – cash will be king – but only for a short while. Put some into physical gold that you arrange to take possession of. Spread the rest into other countries and other investment types. Buy beans and shotguns. Go on a Bear Grylls survival course. Make a lot of friends in your neighbourhood.

Not very appealing. I think I’ll just hang on, put my fingers in my ears, close my eyes and sing “La-la-la” very loud.

It is obvious: we’re doomed to fail to act

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Posted by chrisrick13 on October 31, 2017

It is obvious: we have some very good negotiators who can deal with the EU and Brexit

I have no idea how to become a good negotiator. Even people who have a track record of good negotiations do not always do it well.

My approach is to learn the tricks that other negotiators might play on me and to try to avoid doing things that might weaken my stance. The simple and obvious mistakes can easily be avoided.

For example never negotiate by giving. A good negotiator will take the gift and simply carry on from where they were. That is certainly a mistake that the UK has made a couple of times already.

Never accept a first offer is an easy one. You can accept a first offer if you want to annoy the other side but later on you will find yourself annoyed as well.

Another tactic is to question everything. Do not assume or automatically accept. For example we have two years to negotiate an exit from the EU. Why? Does anybody know how long such a negotiation ought to take? Somebody pulled 2 years out of a hat 40 years ago in a very different world to today. The classic example of that negotiating is the Vietcong in Paris with the USA. They spent a long time negotiating seating positions and not much time negotiating anything else. The Brexit negotiations are not at the sorting-out-the-seats stage yet. Is two years going to be enough?

This comes to time pressure. You can put pressure on the other side with time. “The offer is until close of business today”. Oh yeah. Go in tomorrow and tell them if they can do yesterday’s deal you might want to put your hand in your pocket. They always find some way to extend the time. A lot of people rush to buy today though.

A lot of negotiation is about the strength of your place or your perceived strength and how the other side views that ‘strength’. One of the ways to acquire strength is to work out your BATNA: Best Alternative To No Agreement. When you have worked it out you might be happy enough. You might be dismayed in which case you will negotiate away from there. You have to work it out. If there is no deal then this is what we will have.

I do wonder if the government has worked out a BATNA. There are plenty of countries doing very nicely that are not in the EU. We’ll work under WTO rules with the EU. Some things will be worse and some will be better. We don’t know as it has not been done before. Just maybe we’ll have a lot of pain and come out the other side in better shape?

The BATNA can be a hidden source of strength or you can tell the other side. Whatever it is they will have worked it out and considered the options. However you will have done the same for them. What is the EU’s BATNA? This is a fine point as there are those running the EU – a small band of unelected politicians – and the people of Europe. If the UK leaves and a few years later rises from the ashes that will definitely be the end of the EU. Perhaps the leaders see that and want some sort of deal where the UK leaves but has many of the benefits of membership. A full exit will not actually happen and the risk goes away.

Another tactic is the full deal. It is not done in bits. The negotiation is perhaps done that way but it is for a whole deal at the end. There is no agreement to pay the EU a certain amount at the front of the negotiation. Simply fall back to your BATNA. You can insist on something ludicrous: 20p. Perhaps you can get the EU down to a very low number before you move on. One that you are very happy with. Time pressure is in operation. I wonder. We contributed to the EU for all the time we were in it. Surely some of that money has bought us something. Which bit of the Eiffel Tower is now ours? We can have the top 5% and stick it on top of the Blackpool tower? We make a ludicrous offer back to show how stupid we consider the idea of agreeing a payment up front is.

There is a lot to consider from a negotiating standpoint without even considering what the negotiation concerns.

It is obvious: we have some very good negotiators who can deal with the EU and Brexit so why not use them?

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The kick in the tail

Posted by chrisrick13 on October 23, 2017

It is obvious: stupid

To stop the global economy from collapsing we need continued expansion of our economy, everyone’s economy. Support of old debt and new debt comes out of increased production or economic activity. Those debts include money spent and promises of money such as pensions. That can’t happen. As you turn the corner on the exponential curve even the lowest rate of increases become impossible in a very short time. It runs the same for oil reserves and consumption of them.

To double the economy every 30 years or so needs more people to produce and consume. We cannot each of us double our production and consumption. I’ll volunteer for the population increase side of things and the consume bit as well, but I’m retired so I need a lot of other people to produce for me. If we have lots of new people to keep economic activity increasing they have to live somewhere – production of their housing will be part of the increased economic activity which helps. Increased consumption of decreasing reserves of all sorts of stuff though.

There are at least 20 million places where people live in the UK – to be very fuzzy. To double the population we will need another…20 million places for people to live. Allowing for places to fall-down or be pulled down this going to be at least 700,000 new houses/flats a year.

There is the problem that at the moment that a lot of people who want to live in their own home or at least a place bought by a loan from a bank cannot afford to. The (Labour) government created a rule that on any development of housing anywhere 1 in 13 of the houses had to be low-cost social housing. A piece of genius by the government as all developments suddenly only had 12 houses in them. I wonder if this is still in place? Then the (Conservative) government created schemes such as Funding for Lending and Help to Buy that were there to help first time buyers get a house. Of course if the seller knows that the buyer can get more money they put their prices up and this is what has happened. Buyers have climbed a step while the house price has climbed two.

How can you house the extra 60 million needed in this country over the next 30 years? The answer is very simple: build houses. Just build and build and build. It is a market and soon house prices will fall because everyone will see supply rising to meet demand. A cabinet minister last week proposed 300,000 new houses a year. He is only 100% out on the number needed. No details and it is just words, very similar words to those I have heard many times over the years.  (I’ll ignore the problem of where those houses might be put.)

The problem? The proposal is not enough to support the population growth this country needs to avoid the economy failing. Without the growth (and the people) we will default on debts. The pound will devalue. Nobody will lend us money. The only solution will be hyper-inflation or very high interest rates.  It might be civil unrest and a lot of other very unpleasant effects.

I am an optimist. Lets just suppose that we pull it off. 20 million homes and population doubled in 30 years. 120 million of us sit uneasily on this island. What happens next. Come on! Catch up! In the following 30 years we’ll need another 120 million people and 40 million more houses. I’m nearly 70. I don’t care. If I was 10 I would be looking nervously into the future because the one I have laid out, as unpleasant as it might be will not happen (twice). It will be something worse.

It is obvious: stupid…its an exponential curve

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Brave New World…revisited

Posted by chrisrick13 on October 16, 2017

It is obvious: writing is simple

A comment on the earlier blog shows the paucity of my writing.

We are sitting on an exponential curve for many things. Economic activity is one of them. Without that regular doubling everything collapses. Particularly important are pensions that need young people producing more to support the pensioners. A simple way out of this is to kill them off – old people who is. The coming failure of antibiotics might well see to that. Population growth which is flattening in many parts of the world links to this.

economic growth is also essential with governments running deficits. Continued economic growth pays for the extra borrowing. We will never stop spending and start saving to pay off debt. Individuals might but governments never will.

The point of my earlier blog is that we are on a ‘J’ curve and have trundled along the bottom for many, many years. Now we are turning the corner just before the vertical line.

Except we are not. It is just not possible. The next doubling is always 35 years away at 2%. Go back to 1950 and we probably did double to 1985. The next double from there is to 2020. It is very clear that it is not happening and will not happen. The obvious reductio ad absurdum is that we either need a London twice the size of the 1985 London or a second London. Same for all the other cities and towns in the UK. Has not happened, will not happen, cannot happen.

Thus the end of economics, as we have known it for all our lives is set in the system. Central banks have ‘kicked the can’, most obviously since 2007 but in fact for a long time before that. Simulating continued growth or creating it by borrowing against the future.

How long have we got? Things always trundle for a lot longer than you think they possibly can. To my mind they have already done that! I’ve been looking for triggers that will start things off. It doesn’t have to be a trigger though. Just the natural order of events will do it. The obvious one for the UK is a run on the pound. The only way to defend this is to put interest rates up. Otherwise we cannot buy things from other countries and as debt rolls over at higher and higher rates demanded by lenders we can no longer pay our debts and default. That then means nobody will lend us money. End of foreign holidays! End of orange juice. End of bananas. End of a lot of stuff. The alternative is to put up interest rates…and put a million people out on to the streets where they will riot.

I cannot understand why there has not been a run on the pound yet. Maybe Brexit will trigger it? It will be devastating for many people. It will be short though and we will quickly come out the other side. Look at Iceland.

Invest in yourself. Take the simple steps you can to protect yourself. I think cashing pensions and spending the money is a good idea. Even put it abroad to places that you think might fare better than the UK. Norway looks pretty secure except it is mighty close to Russia.

This is not a blog for financial advice. All the advice here is worth what you pay for it. Think about it though. Try some scenarios out and think what you might do. Start with interest rates returning to the long-term average of the last 100 years (4% ish). What happens?

It is obvious: writing is simple but it is not easy

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Brave New World

Posted by chrisrick13 on October 10, 2017

It is obvious: I am looking forwards


Alas, Dr Bartlett is no longer with us. (Colorado Uni.) He has on record the most compelling lecture on exponential increase ever. His interest was in oil and it is scary. The exponential curve applies everywhere else as well.

Simply described it is pretty much a back to front ‘L or a ‘J’ in the right font (where the bottom part is actually flat leading up to the curve). You can trundle along on the bottom happily for a long time with not much change. When you start to turn the corner nothing much happens for a while but there are plenty of warnings as the gradient of the curve starts to change. Then very quickly the change goes infinite as the line goes vertical.  Good examples of the trundle are oil consumption and population growth,

Perhaps the world economy has been doubling on a cycle for many years. Double not very much is…not very much. The curve looks flat or very nearly so. Then you reach the point where it is more than not very much and the doubles are significant. This happened in the late 1900s.

We are very close to the vertical line. At least very much closer. At this point economical theories that worked where the line was flat simply do not apply. There is no theory or set of observations in place to deal with the curve. There is certainly nothing for the vertical line. Practically, this old earth will not support it.

There are many things that stop working as we step off the ‘J’ curve. Pensions are one. Supporting national debt at anything other than a very small percentage of national productivity is another. Company growth and stock market growth is another. The curve will wiggle in ways that seem random even if they are not. It is another world, one that nobody has any idea how to live in. Our leaders continue to try to force the J-curve but we are close to the vertical part where they will be powerless.


It is obvious: I am looking forwards while our leaders can only look backwards

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Won’t get fooled again

Posted by chrisrick13 on September 13, 2017

It is obvious: I can eat lots of things


I have stopped watching tv. I am smug. Not turned a tv on in over a month. The only person who turns the tv on in my house is my wife. She does that to watch Coronation Street. This if OK with me as it further reinforces my behaviour. I have also seen through the extremely convoluted plots of the drama series that are usually shown at 21:00 during the week. No longer do they lure or allure me.

So I am denied a huge source of data. It is data the I cannot verify as information. However at almost 100% where I can verify I discover that it is not information. I remember working on the Eurotunnel project and looking to see if there were two tunnels being dug. The logic was that what I read in the press and saw on tv did not describe the project I was working on.

Yesterday I missed inflation rising to 2.9% as measured by the new index. Were they to use the old index it would be at 3.9%. The new index defines benefits increase each year and the like. The former index defines pension increase for members of the MPC. No mention of RPI, that former index.

This has done a lot for my blood pressure. The BBC can badly represent reality and I am just unaware. I certainly don’t need any political comment any more. I will vote for that nice Mr Corbyn from now on – I know which side by state pension and NHS are buttered on.

I need to keep an eye on Brexit. I will take to the streets if I see the government weakening on that. Though Teresa May has nothing to lose. Why not go for it properly? She just might. Will we see a saint May to join saint Thatcher? Must have a word with the Pope.

I know house prices are moving but I care little of the direction. I am very sure that wage increases are way below the rate of inflation, of whatever stripe. This is a problem I can understand and I am sure of my information. This means there are a lot of people with an increasing asset and decreasing income. They are mostly unaware of this as the static income is eroded by inflation. They do not see a decreasing amount. Decrease someone’s salary and listen to the howls. Make it buy less and there is not a whimper.

The increasing asset is interesting. I own my house and do not share ownership with the bank. Am I going to cut my living standard or spend more of my inflated pounds and eventually have to sell my house to pay the bills? Do not weep for me, I have a second home. What of the people who only own a fraction of their house sharing it with the bank? What of the people who have a debt secured against their house bigger than the value of the house?

Alas, this is the ‘bigger fool’ model in operation. My house is only worth £1m if I can find someone stupid enough to pay £1m for it.

I wonder if there is a tipping point when cashing up with pounds in your pocket and nowhere to live becomes better than hanging on in your house. Not paying the interest on your house loan and giving it back to the bank is a good option if you have no other assets to attach and an income that barely feeds you (and cannot be attached by a court).

So the trigger, that I am constantly looking for, might simply be a big enough shrinkage of the purchasing power of the incomes of enough people to make them sell. A trigger that was there all the time and just creeps up on us. You can fiddle inflation rates all you want but when the salary does not pay the bills then people will take action. At least when they cannot borrow any more money.


It is obvious: I can eat lots of things, even a brick…eventually

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Got some spots here

Posted by chrisrick13 on August 24, 2017

It is obvious: what power have you got, where did you get it from, in whose interests do you use it, to whom are you accountable, how do we get rid of you


I just came across two quotes. I hope they aren’t but I am afraid that they are:

“We decide on something, leave it lying around and wait and see what happens. If no one kicks up a fuss, because most people don’t understand what has been decided, we continue step by step until there is no turning back”


“When it becomes serious, you have to lie”


You have to guess who said it. I’ll give you a clue: they are not from “Yes Minister” though they could have been.

While you are thinking I have another quote, a cracker from Jean Monnet. If you have to ask who he is then you have a problem. It is a bigger one than any others you might have. It is also a clue to the quotes above:

“Europe’s nations should be guided towards the superstate without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose but which will irreversibly lead to federation.”

I think he meant well but I am sure he was 100% wrong in all that he thought and did.

Who was he? Very much the founder of what we now know as the EU. His other quotes are even more chilling.  Even worse he was setting up something to happen that he knew he would be around to endure.

The other two quotes come from that nice Mr Juncker.


It is obvious: what power have you got, where did you get it from, in whose interests do you use it, to whom are you accountable, how do we get rid of you – does not matter we are close to answering all those questions in the UK…Mr Juncker.

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